In an interview broadcast June 16th, 2010, on the Guns and Butter program on Pacifica Network’s Berkeley affiliate station KPFA, host Bonnie Faulkner interviewed Prof Michael Hudson of the University of Missouri-Kansas City regarding the current economic crisis in the U.S. and Europe. Hudson made two main points. He claimed that his perspective is a Marxist one, carrying on the tradition of political economy in contrast to most of the contemporary left. He also stated that there really is no economic crisis per se, but rather a political crisis resulting from the latest chapter of a centuries-long struggle by financial interests to reverse historical gains by progressive forces and regain power over the global economic/political structure. He subsequently advanced a political program to counter this crisis.

A week later, Faulkner (who has done many excellent shows on 9/11) interviewed author and 9/11 researcher Webster Tarpley, who made very similar points, though he did not claim to be in Marx’s tradition. Tarpley presented similar programatic suggestions to Hudson’s, having to do with greater government regulation of finance and efforts aimed at restoring economic growth. The host clearly did not have the familiarity to detect their ugly distortions and serious errors (hard to tell them apart), so it’s up to those of us who can do so to evaluate their presentations and expose these distortions and errors. Not only are their analyses wrong, but they also present prescriptions for “what is to be done” which are so deceptive and pernicious as to amount to outright disinformation. If their program were to be widely accepted and implemented (very unlikely), the effects would harm our species’ ability to survive. But even if it were not, the diversion of attention and energy would be highly damaging.

Hudson, who denounces post-1930s Marxists for not reading Marx's "economics" writings, claims that Marx was a political economist or even an economist. On February 17, 2009, in “The Oligarchs’ Escape Plan” he wrote: “The alternative is a century and a half old, and emerged out of the ideals of the classical economic doctrines of Adam Smith, David Ricardo, John Stuart Mill, and the last great classical economist, Marx.” In fact, as Maximilien Rubel explained in the essay “A Study of Marx's ‘Economics',” Marx wrote Capital as an attack against a "science whose pretext is the wealth of nations and whose raison d'être [reason for being] is the enslavement of 'the poorest and the most numerous class.' For Karl Marx, political economy was the theory of evil, the science of the dominant social order, and he undertook the study of economics with the single, fixed purpose of censure and denunciation." He saw political economy as "a science of the means of obtaining wealth by producing poverty" (1).

In 1955, Paul Mattick, a real Marxist who had read Marx’s critique of political economy and had written about it starting in the 1930s, wrote an essay titled “Marx and Keynes” in which he explained Marx’s position with regard to political economy and its practitioners:

“Classical economy, whose beginning is usually traced to Adam Smith, found its best expression and also its end in David Ricardo. Ricardo, as Marx wrote, ‘made the antagonism of class-interest, of wages and profits, of profits and rent, the starting-point of his investigation, naively taking this antagonism for a social law of nature. But by this start the science of bourgeois economy had reached the limits beyond which it could not pass,’ for a further critical development could lead only to the recognition of the contradictions and limitations of the capitalist system of production. By doing what could no longer be done by bourgeois economists, Marx felt himself to be the true heir, and the destroyer as well, of bourgeois economy.”

Hudson, both in the interview and in his writings, has made out Marx to be an advocate for industrial capital against finance capital (which he claims represents a vestige of feudalism) who saw capitalism as evolving into socialism. From the February 17, 2009 article: “Their [political economists, including Marx] common denominator was to view rent and interest [as] extractive, not productive. Classical political economy and its successor Progressive Era socialism sought to nationalize the land (or at least to fully tax its rent as the fiscal base). Governments were to create their own credit, not leave this function to wealthy elites via a bank monopoly on credit creation. So today’s neoliberalism paints a false picture of what the classical economists envisioned as free markets. They were markets free of economic rent and interest (and taxes to support an aristocracy or oligarchy). Socialism was to free economies from these overhead charges.”

Six days later, in “The Language of Looting,” he wrote: ”The fact that today’s neoliberals claim to be the intellectual descendants of Adam Smith make[s] it necessary to restore a more accurate historical perspective. Their concept of ‘free markets’ is the antithesis of Smith’s. It is the opposite of that of the classical political economists down through John Stuart Mill, Karl Marx and the Progressive Era reforms that sought to create markets free of extractive rentier claims by special interests whose institutional power can be traced back to medieval Europe and its age of military conquest... The argument between Progressive Era reformers, socialists, anarchists and individualists thus turned on the political strategy of how best to free markets from debt and rent. Where they differed was on the best political means to achieve it, above all the role of the state. There was broad agreement that the state was controlled by vested interests inherited from feudal Europe’s military conquests and the world that was colonized by European military force. The political question at the turn of the 20th century was whether peaceful democratic reform could overcome the political and even military resistance wielded by the Old Regime using violence to retain its ‘rights.’ The ensuing political revolutions were grounded in the Enlightenment, in the legal philosophy of men such as John Locke, political economists such as Adam Smith, John Stuart Mill and Marx. Power was to be used to free markets from the predatory property and financial systems inherited from feudalism. Markets were to be free of privilege and free lunches, so that people would obtain income and wealth only by their own labor and enterprise. This was the essence of the labor theory of value and its complement, the concept of economic rent as the excess of market price over socially necessary cost-value.”

Marx, however, did not see capitalism evolving smoothly into socialism. Quite the contrary, he saw the need for an organized movement to overthrow capitalist social relations and replace them with socialist relations. He saw capitalism as being inherently a system based upon the exploitation of the labor power of the many by a tiny elite, a form of class domination, and rejected any sort of notion that capitalist social relations were a transhistorical norm which humans have to work within. He increasingly stated that this necessary transformation was impossible to accomplish by taking over the existing state and using its power to implement socialist measures, either by voting or by a coup; change would require elimination of the state and all forms of hierarchal power set apart from the populace. He forecast that the failure to cast capitalism aside would lead to greater and greater calamities for humanity with ever more destruction. I think the subsequent historical evidence supporting this contention is quite clear.

Beyond identifying Marx as a political economist, Hudson is also complicit in a major deception in asserting that the labor theory of value as articulated by Marx is the same labor theory of value used by Smith and other political economists. This is completely wrong. Smith and the other political economists viewed the social relations underlying capitalism, particularly class relations, as being immutable and reflecting a human nature which includes an instinct to “truck and barter.” To Marx, this was the main reason why political economists were unable to penetrate the seeming secrets of value and the mystery of where profit comes from, as well as capitalism’s tendency towards crises. They were loth to investigate the class relations underlying capital.

Beneath the appearance of voluntary market exchange lay the reality of the naked coercion of the Enclosures and the mass dispossession of the peasantry, which created a class of people dependent upon the sale of their labor power for survival. The surplus labor performed by members of that class, their work time beyond the time necessary to create the equivalent of their survival needs, is what creates all profit. Smith left out this historical fact behind the creation of capitalism, although his much less well-known colleague James Steuart openly discussed it and the need for more Enclosures. Much more on this matter can be found in the web article “The Agrarian Origins of Capitalism" by Ellen Meiksins Wood and “Mass Murder and Slavery” by “Not Bored.” In addition, it is quite telling to see Hudson award capitalists a profit as a reward for their “enterprise,” i.e. they supposedly deserve to make money because they invested money with the intention of making money! It is a classical capitalist apology for profit, one which Marx mercilessly and repeatedly attacked.

Mattick, in his book Economic Crisis and Crisis Theory (1974), elaborated Marx's understanding of market interactions such as value and exchange as merely the surface appearances of the far more fundamental class relationships which structure capitalist society:

“The limits of bourgeois economics are the starting point of the Marxian critique. For Marx economic relationships are the form assumed by class relationships under the conditions of capitalist production. Value and price are equally fetishistic categories for the real class relations that lie beneath them. While the classical theory of value speaks of exchange value and use value, Marx asks why the concept of value exists at all. His answer is that under the conditions of capitalist property relations, the social labor process is necessarily represented in terms of value relations. Since in such a system the class relations of exploitation have the form of exchange relations (since capitalists buy labor power from workers), the division of social production into labor and surplus labor must take on the character of value relations and appear as value and surplus value. Were society not a class society resting on exchange, there would be no exchange between the owners of the conditions of production and the propertyless workers, and the social production relations would not be value relations.

"The difficulties which the classical economists had with the theory of value were due to the fact that although they considered commodities as combining exchange value and use value, they did not discover this double character in the commodity labor power. This discovery was reserved for Marx, who was thus the first to account for exchange relations as they actually exist without abandoning the law of value. The exchange of commodities on the basis of labor-time equivalence can yield no profit. The double character of the commodity labor power creates the possibility of profit. While according to the law of value the purchaser of labor power pays its exchange value, he acquires at the same time its use value, which is able to produce a value greater than its true exchange value. This is as much as to say that the price relations of the market can be understood only with reference to the value relations on which, as relations of production, they are based. The essence of the value-governed system is not the exchange of labor-time equivalents but the capitalist appropriation of unpaid surplus labor.”

Hudson’s characterization of Marx as an advocate for a liberated capitalism thus amounts to a grave misrepresentation of the worst kind. Additionally, it is one which has been undertaken with a particular agenda in mind. Hudson denied in the interview that any basic crisis is currently taking place within the capitalist system, let alone that crisis is endemic to the system, and explains the current situation as the latest chapter of finance capital continuing what it has done since 1980, reversing all the supposed gains of 20th century social democracy and liberal reformism in order to promote its own social domination at the expense of industry, labor and agriculture. This is ostensibly being done by shifting the tax burden from those who own land and financial capital, to labor and owners of productive capital, and imposing austerity upon the working population. He contends that the European Union was created by Europe’s socialists as a part of the historical process of liberating capital from the rentiers, and laments that these “socialists” now enforce the austerity desired by big finance.

But even a cursory look at history discloses that the social welfare measures enacted after WWII in Europe and to some extent in the US were only possible because of the postwar economic expansion resulting from the rebuilding the world’s largely shattered industrial structure, by unprecedented exploitation of the resources of the “underdeveloped” nations, and by massive expansion of debt. Such a look would also disclose the key role played by France and West Germany in creating the EU in the 1950s. Neither country had at the time a government in which the “socialist” parties participated. The EU was in fact pushed by the U.S. as part of consolidating the post-WWII American-dominated global economic system.

Hudson reiterated in the interview that if finance capital were curbed or outright nationalized (or put under public control, as with state banks such as North Dakota’s), and a tax instituted on land and on financial interests, finance capital could again be subjugated to industrial capital, and economic growth and the progress towards social justice could be resumed. He discussed his recent activities in creating a political program for an opposition party in Latvia which wishes to repudiate austerity policies imposed by international finance and instead institute pro-growth measures, making it quite clear that this is what he sees as the strategy which left activists in the US ought to pursue, i.e., electing candidates to office who would implement such proposals. He advocates increasing investment in infrastructure in order to lower industry costs, and increasing the wages of workers, both of which are supposed to make American industry and agriculture better capable of “underselling other countries,” i.e., increased U.S. competitiveness in world markets. It is as if there are no limits on capital created by its own structure, just press the gas pedal to the floor and let the economic engine roar. This is quite blatantly a capitalist agenda, and Hudson is attempting to use the Marxist label to brand it as “progressive,” to legitimate it in the eyes of what currently passes for the “left.”

Marx, on the other hand, made capitalism's inner tendency towards crisis a core part of his analysis. Hudson pretends that there is no crisis, that in fact there hasn't been one continuous global crisis since the early 1970s (before the post-1980s political changes which he blames the current situation on), or global crises before WWI and WWII, with postwar "recoveries" running out of steam before very long in each instance. His take is therefore a falsification of the very essence of Marx's analysis. This is not a matter of "correct line," but of serious misrepresentation of someone else's thinking and analysis. The crisis which began in the early 1970s has been delayed and ameliorated by a variety of measures, in particular the most massive expansion of debt in history, leading to the creation of unsustainable debt bubbles. It is rooted in the very structure of capital, whose main expression in the world of perceivable phenomena is the growing tendency of the rate of profit on capital to fall, manifested most visibly in a growing global overcapacity in all branches of production. More thorough analyses of the crisis can be found in my earlier article “The Modern American Left Doesn’t Get Capitalism” as well as Internationalist Perspective’s article “Crisis of Value.”

This crisis is why capital has deserted the increasingly unprofitable sector of production in favor of finance and, increasingly, outright financial speculation. Government measures can no more counter the tendency of the rate of profit to fall than they can counter the law of gravity. It is this crisis which has been ongoing since the early 1970s which has led to cutbacks in the post WWII structures of social welfare in the industrialized world and to changed policies on the part of all governments, including those run by parties which are “socialist.” Indeed, such parties have taken lead roles in dismantling the “welfare state” and imposing austerity in places such as Britain, Germany, France and Sweden. This has little to do with Marxists not reading Marx’s “economic” writings, but rather reflects the fact that these parties are a part of the corporate/state ruling apparatus, and thus see their interests as congruent with those of the capitalists. An aside: there is very little proof of a separation between those who control “productive” capital and those who control finance capital. A look at a board of directors of any major industrial enterprise usually turns up someone on the board of a large finance company, and vice versa. Top officials of both industrial and financial mega-firms belong to the elite groups such as the Council on Foreign Relations, Trilateral Commission and the Bilderberg Group, the entities which are the real decision-makers in this society, operating behind the proverbial curtain, while figurehead politicians appear to govern.

Additionally, on top of the crisis of capital, we are now encountering two crises never before experienced. The world’s ecological systems are downright collapsing, exemplified by greatly increased climatic instability, a record pace of species extinctions, and spreading problems created by toxic chemicals and genetically engineered organisms. Simultaneously, we are facing a growing resources crisis, in particular energy sources, as fossil fuels are approaching or (more likely) at their peak production levels while demand for the cheap energy they provide continues to increase, and “alternative” energy sources cannot substitute for them given our levels of energy use. Additionally, the supplies of water and of vital minerals and metals are also peaking. These two crises are deeply intertwined. For example, climate change means increased pressure on water resources. The current Gulf of Mexico catastrophe, still unfolding as these words are being written, in which the Gulf’s ecosystem is being murdered (and the economic structure of the region devastated), is the result of Peak Oil. Ever fewer new oil fields are being discovered, and they are smaller, while the older fields are rapidly depleting. This leads oil producers to pursue less accessible fields which require dangerous techniques to bring onto production. Such a situation strongly encourages cutting corners in safety procedures in order to lower costs. The idea that humanity can have perpetual growth, which is what capital inherently demands, is not only preposterous, but represents downright madness, if not a suicide wish.

In his interview a week later, Webster Tarpley reiterated Hudson’s contention that there is no real crisis, but rather the results of manipulation of the political process by finance interests, and that what is needed is increased government intervention to roll back the financial power grab and restore economic growth. He did so without any attempt to place himself as a defender of the Marxist tradition. I suppose he ought to be credited for not trying to do so. Instead, he positioned himself in the tradition of the New Deal. His big idea is to force the Federal Reserve to create out of thin air $3 trillion with which to finance the infrastructure rebuilding program, which would involve means of transportation such as the Interstate highway system, canals and railroads, as well as the rebooting of American industry. Are we to assume that the massive money creation would not create any problems, and that warnings about inflationary consequences of such a move are just right wing propaganda?

Tarpley has done some good work in the realm of 9/11 research. A couple of pages in one of his books, 9/11 Synthetic Terror (2), however, are quite revealing of his thinking on the subject of the economic crisis. He called the Bretton Woods agreement of 1944, designed by the FDR administration, and the post-WWII US-dominated global economic structure which it created, “the most successful monetary arrangement the world had ever seen.” Never mind the reality of this arrangement, namely the expansion of the American empire by any means necessary, culminating in the Vietnam War, nor the fact that it collapsed by the early 1970s, which Tarpley admits, though he pretends this was due to a push by evil forces for deindustrialization, forces which have always hated science and technology because of their “egalitarian effects.” He makes any notion of growing material limits to industrial development, be they stresses on the environment or developing shortages of fossil fuels and other resources, to be simply propaganda disseminated by elite think tanks determined to derail human progress. Humans need economic development, and this requires greater energy resources, he asserts. This is identical to the line pushed by the Lyndon LaRouche organization. No surprise, Tarpley was at one time second only to LaRouche himself in that grouping. If there are no real fossil fuel shortages, one wonders why energy companies are increasingly embarking on projects in ever more remote and dangerous places which present ever greater likelihood of catastrophic accidents and yield less and less energy return for a given amount of energy input.

Not coincidentally, two weeks after this interview, Tarpley was again on Guns and Butter, extolling the virtues of FDR’s New Deal, in particular Social Security. Most people on the American left have a similar perspective, viewing this program and the New Deal in general as if they were significant steps towards social justice or even socialism, when in fact FDR adviser Gerard Swope, at the time also president of GE, was the prime architect of Social Security, among other New Deal programs. The New Deal was also heavily influenced by Herbert Lehman of Lehman Brothers (yes, that one) and W. Averel Harriman, of Union Pacific and Union Bank, which was to function as Hitler’s bank, with the cooperation of Harriman and Prescott Bush, the father of George H.W. Bush and grandfather of Dubya. Meanwhile the foreign policy of the U.S. was fully turned over to the Council on Foreign Relations, whose work led to the Bretton Woods agreement and the rest of the structure of the post WWII US-dominated global order.

Thus, it is no surprise that Tarpley calls for the reinvigorating of American industry and for policies aimed at restoring growth, as growth is good. In this, Tarpley and Hudson are in full agreement: the U.S. needs to restore its competitiveness. Given the current concurring crises, many people are increasingly questioning the way we live and even moving towards wanting to dismantle capitalism, the root of the problems, and toward creating a completely different world. However, both Hudson and Tarpley are in essence propagandists for an effort to recruit political activists and other members of the left into a campaign whose aim is not to essentially change the way we live, but to defend and fortify the most basic aspects of the social/economic/political status quo. This program is highly unlikely to be fully implemented by the system, given the growing inability of production activity to yield a profit, but its underlying rationale is a great way to legitimate a mobilization behind the “national interest,” i.e. the interests of American capital in the realm of each-against-all global competition for profitability as international competition gets ever more intense. The only possible results of such a trajectory are A. a global trade war which (d)evolves into a world war, B. an international insurrection which results in the overthrow of capitalism, or C. a rapid collapse of the global production apparatus and efforts at local survival amidst widespread barbarism. The course advocated by Hudson and Tarpley is thus highly pernicious, relying upon deception and disinformation. If implemented, its likely result would be a global war.